If you’ve been paying attention, you probably would’ve noticed that inflation is at an all-time high. Living is now more expensive than ever before. Everything costs more, from your movie tickets to your groceries to even fuelling your car. And after you’ve sorted out your bills you might have very little left to save, not to talk of invest.
If you are reading this piece, it is because you want your money to work for you. And why not? You work hard for it. But, with inflation rising, your purchasing power is dropping, especially if you are leaving your money sitting around, not earning interest.
A savings account just isn’t enough interest. Let’s say you have ₦100,000 in a savings account that pays a 1% interest rate p.a. After a year, you will have ₦101,000 in your account. But if the rate of inflation is running at 2%, you’d need ₦102,000 to have the same buying power that you started with. You’ve gained a thousand naira but lost buying power. Any time your savings don’t grow at the same rate as inflation, you will effectively lose money.
What can you do instead? You can invest your savings for a better return.
Before you begin investing, consider the risks and ensure that you won’t need the money you’re investing for a long time – preferably five years or more. Experts advise that you pay off high-interest debt— because the interest you’ll pay will negate any gains you make on your investments; and build an emergency fund — because you will need three months or more of living expenses in a savings account to ensure that you are able to survive financially in the event of an unexpected issue e.g., job loss.
You can begin investing when you’ve made progress on your debts and your emergency fund.
Most of us shy away from saving and investing because we think we don’t have enough money to begin. For most of us also, budgeting for investing may seem like a daunting task, especially if you’ve never invested before. But here’s how you can get started with your budgeting for your investments.
Saving money and investing it are closely related. You have to first save some money up before you invest it. Here are different shoestring approaches you can use to start your investment journey, with the little savings you have.
Different approaches work for different investors. Know your personal risk tolerance and be comfortable with the risk of your potential investments – historically, the lower the risk, the lower the returns and vice versa. You do not need huge amounts of money to start up with investing. Choose an approach and start with what you have. Feel free to write us, to share your investment journey with us at [email protected]. We will be happy to hear from you.
Disclaimer: note that this article does not constitute as investment advice. This article is for general purposes of information only.